Gold Finance reported, according to market sources, that UBS strategists believe there is a significant risk that US interest rates will ultimately fall further than currently priced by the market, potentially inflating a stock market bubble. The UBS team led by Andrew Garthwaite said that since 1981, every time the Fed has started an easing cycle with a 50 basis point cut, it has been accompanied by a recession, but this time they believe it's a sign of Fed aggression rather than a recession. Garthwaite pointed out that the market pricing reflects interest rates bottoming out around 2.8%, a level that the Fed has previously hinted at being the neutral rate, "so there is a significant risk that rates will ultimately fall further than expected."

The UBS team believes that a steepening yield curve dominated by short-term bonds favors defensive stocks and consumer goods sectors, excluding luxury goods, and expects small-cap stocks to outperform, as their floating rate debt is three times that of large-cap stocks.